Earlier this month, House Budget Committee Chairman Paul Ryan (R-WI) joined the growing chorus of Republicans who have been claiming that not raising the debt ceiling for a few days once it is hit around August 2 won’t be a big deal. “If a bondholder misses a payment for a day or two or three or four — what is more important is you are putting the government in a materially better position to better pay its bills going forward,” Ryan said.
However, during a question and answer session hosted by the Spolight on Poverty and Opportunity, Ryan admitted that even a short-term failure to raise the debt ceiling — which would force the Treasury Department to start choosing which creditors to pay off and which ones to stiff — would mean “literally cutting off assistance to people” who rely on “vital programs“:
So ultimately, if the debt ceiling is not increased you ultimately would have a default. Now perhaps not immediately, but some would argue that the Treasury can prioritize its payments. I believe they can, but I don’t think we want to go down that path.
I don’t think we want to tempt default. That’s not our strategy. And so if we did have a default or if we did not raise the limit, then Treasury’s prioritizing payments and literally cutting off assistance to people because they don’t have the checks they can write to vital programs.
Ryan has been all over the place when it comes to the debt ceiling. Back in January, he said “you can’t not raise the debt ceiling. Default is the unworkable solution.” However, a few weeks ago he said that raising the debt ceiling “won’t happen, I’m serious about this, it won’t happen if we don’t cut spending.” Then he said that short-term default is okay with him.
But Ryan is correct that even a short-term failure to raise the debt ceiling could have disastrous consequences. For instance, the Bipartisan Policy Center found that one of the most immediate cuts, were the debt ceiling not raised in time, would have to be to Social Security. As the BPC put it, if the debt limit isn’t increased and Treasury is forced to only work with the revenue coming in on a daily basis, “handling all payments for important and popular programs (e.g., Social Security, Medicare, Medicaid, Defense, active duty pay) will quickly become impossible.”
And forcing the government to stiff somebody, regardless of who it is, is going to call into question the nation’s creditworthiness. It seems that Ryan agrees, even if he is disinclined to do anything about it.